Metro Denver’s housing market could diverge in a big way this year, with apartment rent increases slowing to a crawl or even reversing, while home prices continue to race higher.

Signs of cooling are strongest on the multifamily side, where a large number of high-end units are expected to hit the market this year.

ApartmentList estimates Colorado apartment rents rose 1.8 percent year-over-year in December, while metro Denver apartment rents are up 0.8 percent, both down from annual rent increases in the 4 percent range in July.

Axiometrics estimates that metro Denver apartment rents were rising at an annual pace of 1.7 percent in the fourth quarter, down sharply from the 6.4 percent pace they moved into 2016 with.

Abodo, in its annual rent report, puts metro Denver in the category of declining markets, recording a 6.7 percent drop in one-bedroom apartment rents in January compared with a year earlier, the seventh steepest decline among the cities it tracked.

“We anticipate that, starting with luxury developments, the rent for apartments in Denver should remain pretty consistent in 2017,” said Sam Radbil, a spokesman for the Wisconsin-based online apartment listing firm.

Seattle-based Zillow, whose rental index includes single-family homes, puts metro Denver rent increases around 2.8 percent last year and is projecting an increase of 2.5 percent this year.

One of the more upbeat reports comes from RealPage in Texas, which estimates metro Denver rents are rising at a 4.4 percent pace, down from gains in the 8 percent to 10 percent range a year ago.

“It has been a meaningful slowdown,” RealPage chief economist Greg Willett said. “But it is still a good number.”

In metro Denver’s favor are the large number of young adults moving in to take relatively higher-paying jobs which can support the higher-priced units hitting the market, he said.

“Denver is pretty much viewed as the perfect rental market,” he said. “The demand numbers are very solid.”

RealPage estimates about 11,000 apartments came onto the market last year and that another 13,000 should become available this year out of a construction pipeline of around 21,000 units.

So far, the Denver market has managed to absorb the new supply, but landlords, eager to fill their projects, are offering more concessions — including a month or two of free rent — to win over tenants, a key reason why rent increases have slowed.

Willett said apartment developers, initially focused almost exclusively on downtown areas, are casting a wider net, although the economics have them still focused on higher-rent or luxury units.

Whether the metro Denver apartment market holds up or rolls over will depend mostly on continued job growth and in-migration, given that developers can’t easily put the brakes on projects launched years earlier.

Abodo notes that Denver, while still enjoying strong population gains, ranked second among the country’s 50 largest cities for the percentage of the population moving out.

Home prices

The Colorado Association of Realtors estimates the median price of a home sold in Colorado last year rose 10 percent, with both new listings and the inventory of homes available for sale in December at historic lows.

“We are looking at a 2017 that looks a lot like 2016, with some of the froth off the market,” said Mark Trenka, chairman of the Colorado Association of Realtors.

Stable or falling rents could leave more tenants comfortable with not making a move, while also persuading some investors to take their chips off the table and sell their rental homes.

Rising mortgage rates could also prove a headwind to future price increases by reducing the ability of buyers to qualify.

“Each rate increase takes a small percentage of buyers out of the market,” Trenka said.

But a slowing in home price gains from the double-digit pace of the past two years could actually be health for the market.

Zillow predicts metro Denver will rank as the country’s ninth hottest real estate market this year, with home prices rising 3.6 percent. That is down from a 9.7 percent increase last year that made the city the country’s hottest housing market.

Among metro Denver’s hottest neighborhoods, with home-price appreciation rates of 7.6 percent or higher, are Aurora’s City Center North and Centretech neighborhoods and Denver’s Elyria-Swansea, Globeville and Westwood neighborhoods, Zillow said.

Clear Capital is calling for a 7.3 percent increase in metro Denver home prices this year, down from the 10.7 percent increase last year. That places Denver second in its rankings after Dallas.

Not every forecast expects metro Denver to come off its double-digit pace. VeroForecast places five Colorado cities among its list of the 25 top performers for home price gains in 2017, led by metro Denver with a 10.2 percent gain that will rank second only to Seattle at 10.6 percent.

Other top performers among Colorado cities include Fort Collins at No. 11 with an 8.5 percent gain; Boulder at 14th with an 8.2 percent gain; Greeley at 18th with a 7.6 percent gain; and Colorado Springs at 24th with a 7.2 percent gain.

Across the state, foreclosures, a measure of distress in the for-sale housing market, continue to drop. Colorado foreclosure starts were down 18.4 percent last year and they are down 83.05 percent from the peak hit in 2010, according to ATTOM Data Solutions.

CoreLogic found that Colorado and metro Denver had some of the lowest rates of homeowners in a negative equity positions, meaning they owed more on their mortgage than their homes were worth, which is a big contributor to foreclosures when a market softens.

Aldo Svaldi has worked at The Denver Post since 2000. His coverage areas have included residential real estate, economic development and the Colorado economy. He's also worked for Financial Times Energy, the Denver Business Journal and Arab News.

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